Case Background
The case arose from a contract identified as “USSS-80” between a proprietorship firm and the Bihar State Educational Infrastructure Development Corporation Ltd. (BSEIDC), a Government of Bihar undertaking. The firm was the petitioner before the Patna High Court.
The dispute began when BSEIDC issued a notice to show cause to the petitioner. This notice, dated 12 February 2021 and marked as Annexure 4 in the record, required the petitioner to explain why proceedings under Clause 3 of the contract should not be initiated. Clause 3 is referred to in the judgment, but its detailed contents are not reproduced.
The postal receipt on record, mentioned at page 38 of the paper book, showed that the show cause notice dated 12 February 2021 was actually received by the petitioner only on 27 February 2021. This timing became central to the Court’s decision.
Despite this, the authority went ahead and passed an order/communication dated 5 March 2021, marked as Annexure 6, by which the contract was rescinded and the performance security was forfeited. This order was challenged before the Patna High Court by way of a civil writ petition, registered as Civil Writ Jurisdiction Case No. 10050 of 2021.
The petitioner sought several reliefs. He asked the Court to quash the rescinding of the contract and the forfeiture of his performance security on the ground that no opportunity of hearing was given to him. He claimed that this violated Articles 14, 16 and 19(1)(g) of the Constitution of India.
The petitioner also sought a writ of prohibition to stop the respondents from taking any coercive action against him without following due process and principles of natural justice. Further, he requested interim protection to stay the operation of the rescinding notice and to restrain the respondents from terminating the contract without following legal requirements.
What the Court Examined and Decided
The Patna High Court, speaking through Hon’ble the Chief Justice, focused on the timing of the show cause notice and the subsequent termination order. The Court looked closely at the documents contained in the paper book.
From the record, the Court found it “quite apparent” that the impugned order/communication dated 5 March 2021 was passed or issued “prior to the time stipulated” in the notice to show cause. The show cause notice, Annexure 4, was dated 12 February 2021 and required the petitioner to explain why action under Clause 3 of the contract should not be taken against him.
However, the postal receipt showed that this notice, though dated 12 February 2021, was actually received by the petitioner only on 27 February 2021. This meant that there was a significant gap between the date printed on the notice and its actual service on the petitioner.
The Court noted this fact clearly. It did not go into a detailed calculation of the time available to the petitioner to respond, nor did it rule on whether that time was actually sufficient. Instead, the Court took a broader view based on fairness and natural justice.
Without deciding the narrow question of whether the petitioner ultimately had enough days to reply, the Bench held that, in the interest of justice, the authority should be required to pass a fresh order. The key condition was that this new order must come only after giving the petitioner a full opportunity to place material on record in support of his defence and after a proper hearing.
The Court therefore chose a practical solution rather than a lengthy debate on procedural technicalities. It did not adjudicate on whether the termination was substantively correct, nor did it examine the merits of the allegations that led to the proposed action under Clause 3 of the contract. All such factual and legal questions were expressly left open.
The writ petition was disposed of on terms that the Court described as “mutual agreeable.” These directions were carefully structured to balance the interests of both sides.
First, in clause (a) of the directions, the Court quashed and set aside the impugned order/communication dated 5 March 2021 (Annexure 6 at page 41). This meant that the earlier decision of the authority to rescind the contract and forfeit the performance security could no longer stand on its own.
Second, in clause (b), the Court directed the petitioner to appear before the “appropriate authority” on 12 January 2022. On that date, the petitioner was required to place on record all material in support of his defence. Thus, the contractor was given a clear opportunity to present his side in a formal manner.
Third, in clause (c), the Court recorded that the petitioner must fully co-operate with the proceedings and should not seek any unnecessary adjournment. This condition ensured that the process would not be delayed at the instance of the contractor.
Fourth, in clause (d), the Court ordered that the appropriate authority would consider and decide “all questions of fact and law” expeditiously and “positively” within a period of four weeks after 12 January 2022. Thus, a strict timeline was given to the authority for completion of the fresh decision-making exercise.
Fifth, in clause (e), the Court made it clear that all questions of fact and law were being left open. This means that the authority, and later any forum approached by the parties, could consider the matter afresh without being bound by any finding on the merits in this writ order.
Sixth, in clause (f), the Court reserved liberty to the petitioner to seek “appropriate remedy before the appropriate forum,” if the need arose subsequently. This preserved the petitioner’s right to come back to court or approach any other competent forum after the authority’s fresh decision.
The Court also addressed the position of the performance security. It recorded that the amount of security deposit already stood forfeited. It then directed that, “till such time a decision is taken,” the amount would not be refunded to the petitioner. In other words, although the earlier termination order was set aside, the security money would remain with the authority until a fresh decision on the contract dispute was reached.
Finally, the Court disposed of any interlocutory applications in the case, stating that they “also stand disposed of.” The judgment was delivered on 3 January 2022, and the uploading date was recorded as 5 January 2022.
Thus, the Patna High Court did not finally rule on whether the contract termination and forfeiture were right or wrong. Instead, it restored the process to an earlier stage and insisted that any decision against the contractor must follow due process and proper opportunity of hearing.
Why This Judgment Matters
This judgment is significant for contractors working with government bodies and public corporations in Bihar and elsewhere. It shows that even in contractual matters, when a State or State-backed body acts, it must respect basic principles of natural justice.
The Court highlighted that orders with serious civil consequences, like termination of contract and forfeiture of security deposit, cannot be passed mechanically. If a show cause notice is issued, the authority must ensure the contractor receives it in time and is actually able to respond before any final order is made.
For small contractors and proprietorship firms, this decision underscores that they have a right to be heard before drastic actions are taken. If an authority passes an order before the contractor effectively gets a chance to reply, the affected person can approach the High Court.
At the same time, the Court also showed that cooperation from the contractor is expected. The petitioner was directed to appear on a fixed date and to avoid unnecessary adjournments. This balanced approach helps ensure that disputes are decided quickly and fairly.
In a broader sense, the judgment from the Patna High Court reinforces that judicial review can be used to correct procedural unfairness, even when the Court does not examine the full merits of the contract dispute.
Legal Issues and Answers
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Issue: Whether the authority could validly rescind the petitioner’s contract and forfeit the performance security based on a show cause notice that was received much later than its date, and before the petitioner effectively had an opportunity to respond.
Answer: The Patna High Court held that, in the interest of justice, the impugned order dated 5 March 2021 must be quashed and the authority directed to pass a fresh order after giving the petitioner an opportunity to place material in his defence and after hearing all concerned. -
Issue: Whether the High Court should itself decide the contractual dispute on merits in this writ petition.
Answer: The Court declined to go into the merits and expressly left all questions of fact and law open, giving liberty to the petitioner to pursue appropriate remedies after the authority’s fresh decision. -
Issue: What should be the status of the performance security pending fresh decision by the authority.
Answer: The Court directed that, although the termination order was set aside, the security deposit, which already stood forfeited, would not be refunded until a fresh decision was taken.
Cases Cited by the Court
- No prior judicial decisions are cited or relied upon in the text of this judgment.
Case Details
Case Number: Civil Writ Jurisdiction Case No. 10050 of 2021
Case Title: Hari Mohan Bishwas a Proprietorship firm through its Proprietor Hari Mohan Bishwas vs. Bihar State Educational Infrastructure Development Corporation Ltd. & Ors.
Citation: 2022(3) PLJR 86
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice Sanjeev Prakash Sharma
Advocates: For the petitioner – Mr. Chiranjiva Ranjan, Advocate; For the respondents – Mr. Girijish Kumar, Advocate
Nature of the case: Civil writ petition challenging rescinding of a government contract and forfeiture of performance security.
Date of Judgment: 03-01-2022
Link to the Judgment: Click here to read the full judgment of the Patna High Court
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